The European central bank's firepower is sadly depleted.
The interest rate on the reserves that banks hold with it is sub-zero;
its quantitative-easing (QE) scheme has hoovered up assets worth 2.6trn euro ($2.9trn)—
equivalent to over a fifth of the euro area's GDP. Even so, in June Mario Draghi, the bank's boss,
promised further stimulus if the economy does not buck up. Statistics published since then suggest little recovery.
Cue much speculation about another attempt to revive growth.
Many expect an announcement at the bank's meeting in September, along with updated economic forecasts.
But its next gathering on July 25th could still surprise, or at least lay the groundwork for stimulus.
With individual instruments nearing limits, it is expected to deploy a combination.
Of late its weapon of choice has been guidance on the path of interest rates.
It has promised to keep rates steady for longer, at least until mid-2020.
But markets expect rates not merely to stay on hold, but to fall—by a tenth of a percentage point, from -0.4%, in coming months.
Banks complain that negative interest rates shrink their margins: they have to pay the central bank to hold their deposits,
but fear that if they pass negative rates on, their depositors will withdraw their cash.
Profits and lending both fall, preventing the rate from transmitting to the real economy.
For now, the ECB reckons it has not reached the "effective lower bound"—
the point at which the expansionary effects of negative interest rates stop outweighing any costs.
But unwanted side-effects may appear as rates go lower.